20110308IPC Answer to Reconsideration Petition.pdf

es111~POR~
An IDACORP Company
DONOVAN E. WALKER
Lead Counsel
dwalkertmidahopower.com
March 7, 2011
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilties Commission
472 West Washington Street
P.O. Box 83720
Boise, Idaho 83720-0074
Re: Case No. GNR-E-10-04
IN THE MATTER OF THE JOINT PETITION OF IDAHO POWER COMPANY,
AVISTA CORPORATION, AND PACIFICORP DBA ROCKY MOUNTAIN
POWER TO ADDRESS AVOIDED COST ISSUES AND TO ADJUST THE
PUBLISHED A VOIDED COST RA TE ELIGIBILITY CAP
Dear Ms. Jewell:
Enclosed for filng please find an original and seven (7) copies of the Idaho Power
Company's Answer to the Northwest and Intermountain Power Producers Coalition's
Petition for Reconsideration in the above matter.
yNV-
Donovan E. Walker
DEW:csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, 10 83707
DONOVAN E. WALKER (ISB No. 5921)
LISA D. NORDSTROM (ISB No. 5733)
Idaho Power Company
P.O. Bo)( 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalker((idahopower.com
Inordstrom((idahopower.com
Attorneys for Idaho Power Company
Street Address for Express Mail:
1221 West Idaho Street
Boise, Idaho 83702
Cf:f
2Uff MAR -7 PM 4= 52
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MAnER OF THE JOINT )
PETITION OF IDAHO POWER )
COMPANY, AVISTA CORPORATION, )
AND PACIFICORP DBA ROCKY )
MOUNTAIN POWER TO ADDRESS )
AVOIDED COST ISSUES AND JOINT )
MOTION TO ADJUST THE PUBLISHED )
AVOIDED COST RATE ELIGIBILITY CAP. )
)
)
CASE NO. GNR-E-10-04
IDAHO POWER COMPANY'S
ANSWER TO THE NORTHWEST
AND INTERMOUNTAIN POWER
PRODUCERS COALITION'S
PETITION FOR
RECONSIDERATION
Idaho Power Company ("Idaho Powet' or "Company"), in accordance with Idaho
Code § 61-626 and RP 331, hereby responds to the Petition filed by the Northwest and
Intermountain Power Producers Coalition ("NIPPC") for Reconsideration of Commission
Order No. 32176 issued on February 7,2011.
NIPPC has failed to demonstrate that the Idaho Public Utilties Commission's
("Commission") Order No. 32176, or any issue decided in that Order, is unreasonable,
unlawful, erroneous, or not in conformity with the law. The Commission's Order No.
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 1
32176 is based upon substantial and competent evidence in the record and
reconsideration should be denied.
I. THE COMMISSION DID NOT ERR BY PROCESSING THIS
MATTER PURSUANT TO MODIFIED PROCEDURE
Idaho Power, Avista Corporation and PacifiCorp, d/b/a Rocky Mountain Power,
(the "Utilties") filed the initial Petition and Motion in this matter on November 5, 2010.
On December 3, 2010, the Commission issued public notice of the Utilties' Petition and
Motion in Order No. 32131, Notice of Joint Petition, Notice of Modified Procedure,
Notice of Intervention Deadline, and Notice of Oral Argument. Numerous parties
petitioned to intervene in this matter. Several parties filed Answers to the Petition, even
though there was no specific provision set forth procedurally by the Commission for
parties to do so. Numerous parties filed initial comments/direct evidentiary submissions
by the comment deadline of December 22, 2010. Several parties filed reply comments
addressing the arguments and positions raised by the initial comments by the reply
comment deadline of January 19, 2011. Numerous parties participated and offered
argument in support of their positions at the oral argument on January 27, 2011.
Subsequent to these evidentiary submissions by the parties and the public, the
Commission issued its final Order No. 32176 on February 7, 2011.
NIPPC makes the procedural claims that it did not have the opportunity to fully
challenge the Utilities' assertions. NIPPC's Petition for Reconsideration, p. 10. NIPPC
further claims that, "Because the Commission's decision was necessarily based on
factual findings, the Commission must hold an evidentiary hearing." Id. at 7. Both
allegations are without merit and wrong.
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 2
A. NIPPC Received Notice and Had the Opportunity to Be Heard.
In addition to the actual notice of the Petition served upon counsel for NIPPC by
Idaho Power on November 5, 2010, NIPPC also was provided public notice of the
Petition and procedure on December 3, 2010, by Commission Order No. 32131. NIPPC
fully availed itself of the opportunities to be heard before the Commission. It filed a
Petition to Intervene and an Answer in Opposition to the Utilties Motion and Petition on
November 8, 2010, a mere three days (and the next business day) after the Petition and
Motion had been filed and served. Additionally, NIPPC filed Comments on December
22, 2010, and Reply Comments on January 19, 2010. NIPPC directly participated in
and offered oral argument supporting its position before the Commission on January 27,
2010. Additionally, NIPPC conducted extensive discovery during the course of this
proceeding. NIPPC served its first set of requests for production upon the Utilties on
November 8, 2010, the next business day after service and filing of the Utilties' Petition
and Motion. NIPPC continued to serve and issue numerous, multi-part and technical
discovery questions to the Utilties throughout the proceeding, the most recent being
NIPPC's Sixth Production Request served on February 4, 2011. NIPPC, through its
Sixth Production Request, has propounded a total of 68 questions, containing a total of
190 subparts to those 68 questions, which have been answered by the Utilties.
NIPPC's argument that it was not able to admit some documents that it wanted to
admit into the record or that it was unable to lay a foundation for those documents
because, "NIPPC intended to admit its documents through the witness it offered" is not
credible. NIPPC's Petition for Reconsideration, p. 6. NIPPC had every opportunity, and
was free to submit any document it sought to submit, and lay any foundation it thought
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 3
necessary through its no less than three written submissions to the Commission. To
state after the fact that it intended to lay a foundation and admit documents through a
witness at hearing, when it had the same notice as the rest of the world that the
Commission's procedure for this matter was to take evidence through written
submissions and Modified Procedure pursuant to the Commission's Rules of Procedure
201 through 210, IDAPA 31.01.01.201-.210, appears as an attempt to create
appealable issues where none exist. NIPPC had every opportunity to seek the
admission of any and all of the materials it felt relevant, to lay the proper foundation,
reference, and citation, and otherwise seek the admission through its written
submissions in both direct evidence and reply/rebuttal submissions. NIPPC had notice
and opportunity to fully be heard. The Commission did not err by denying NIPPC's
request for a live witness hearing.
B. A Technical Hearing is Not Required for the Commission to Make
Factual Findings.
There is no requirement that the Commission can only make factual findings
based upon an evidentiary or technical hearing and, in fact, the reality is quite the
opposite. The Commission's Rules of Procedure allow the Commission to process
matters, including all necessary factual, legal, and/or policy findings and determinations,
upon written submissions only. "The Commission may preliminarily find that the public
interest may not require a hearing to consider the issues presented in a proceeding and
that the proceeding may be processed under modified procedure, Le., by written
submission rather than hearing." RP 201. "If no protests, supports or comments are
received within the deadline, the Commission may consider the matter and enter its
order without a hearing. If protests, supports, comments or a reply are filed within the
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 4
deadlines, the Commission wil consider them and may set the matter for hearing or
may decide the matter and issue its order on the basis of the written positions before it."
RP 204.
The standard of review as to whether the Commission has made valid findings of
fact is not whether a technical/evidentiary hearing was held. The standard of review is
whether those findings of fact are supported by substantial and competent evidence in
the record. With regard to findings of fact, if the Commission's findings are supported
by substantial, competent evidence, the appellate court must affrm those findings,
Industrial Customers of Idaho Power v. Idaho PUC, 134 Idaho 285, 288, 1 P.3d 786,
789 (2000), even if the court would have made a different choice had the matter been
before it de novo. Hulet v. Idaho PUC, 138 Idaho 476, 478, 65 P.3d 498, 500 (2003).
Substantial, competent evidence is defined as more than a mere scintila, but something
less than the weight of the evidence. Industrial Customers, 134 Idaho at 292-93, 1 P .3d
at 793-94.
The Commission's findings in Order No. 32176 are supported by substantial,
competent evidence in the record. The Utilties provided evidence of the explosive
growth of qualified facilty ("QF") wind generation and the impact that growth is having
on the Utilties' systems from a reliabilty and integration perspective. Utilties' Petition
and Motion, pp. 3-5; Comments of Idaho Power Company, pp. 3-6; 15-17; Reply
Comments of Idaho Power Company, pp. 4-5. The Comments of Idaho Power
described the dramatic rate impact integrating the current large amount of QF wind
energy wil have on its customers. Comments of Idaho Power, pp. 7-8; 17-19. Idaho
Power also provided evidence demonstrating that different types of generators have
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 5
different load characteristics and that the Integrated Resource Plant ("IRP")-based
methodology is more accurate in determining the avoided cost of those different
generation resources than is the Surrogate Avoidable Resource ("SAR") methodology.
Comments of Idaho Power, pp. 10-15; Reply Comments of Idaho Power, pp. 10-12.
The record contains numerous other references to competent evidence provided to the
Commission that the continued and unchecked requirement to continue to acquire
additional intermittent and other QF generation regardless of a utilty's need for
additional energy or capacity on its system not only circumvents the integrated resource
planning process and creates system reliabilty and operational issues, but it also
dramatically increases the price utility customers must pay to meet their energy needs.
"Based on the record, the Commission finds that a convincing case has been made to
temporarily reduce the eligibilty cap for published avoided cost rates from 10 aMW to
100 kw. . .." Order No. 32176, p. 9. There is substantial, competent evidence in the
record to support the Commission's findings, and reconsideration should be denied.
NIPPC also claims that "An evidentiary hearing is necessary due to Idaho
Powets late admission that AURORA is incapable of accurately calculating avoided
cost rates for QF projects smaller than two megawatts." NIPPC's Petition for
Reconsideration, p. 15. Idaho Power has never said that AURORA is incapable of
calculating avoided cost rates, and objected to this characterization by NIPPC at oral
argument for this matter. Tr. at p. 20. This is a gross mischaracterization of Idaho
Power's disclosure regarding what it was told by the softare provider regarding
AURORA runs for projects that are less than 2 megawatts ("MW"). As explained at oral
argument, and as set forth in Idaho Powets Response to NIPPC's Sixth Production
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 6
Request No. 68, attached hereto as Attachment NO.1, and incorporated herein by this
reference, Avista has routinely conducted AURORA analysis for projects as small as
100 kilowatts ("kW") with valid results. Additionally, Idaho Power, since the time of filng
reply comments ran and reviewed test modeling and verified AURORA has valid results
for projects smaller than 2 MW. Additionally, as previously stated, Tr. p. 18, Idaho
Power has never received a request to run the IRP-based methodology for a project
smaller than 10 average megawatts ("aMW"), and to this day stil has not been
presented with a QF project under 10 aMW to price with the IRP-based methodology.
NIPPC has not brought forth any examples of such projects, nor has NIPPC brought
forth any other evidence, other than unsubstantiated allegations, that the Commission-
approved IRP-based methodology utilzing AURORA modeling is flawed. The IRP
methodology is a previously existing, Commission-approved methodology for
calculating a utilty's avoided cost rate. The IRP methodology takes into account the
actual generation profile of the proposed QF generation project, and assigns a value to
the provided energy according to the need for such on the utilty's system. In addition, it
ties into the same process, procedures, and analysis that the Company must utilze in
its IRP process to acquire its other generation resources, and plan to meet its obligation
to reliably serve customer load in its service territory. A hearing is not necessary and
reconsideration should be denied.
II. NIPPC'S ARGUMENT THAT THE
IRP.METHODOLOGY DOES NOT ESTABLISH THE
UTILITIES' "FULL" AVOIDED COST IS WITHOUT MERIT
First, the allegation that the IRP methodology provides an avoided cost price that
only accounts for the energy, and not capacity, or fixed, costs is simply not the case,
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 7
and is based upon a complete lack of understanding regarding how the IRP-based
methodology actually works. In fact, the IRP methodology does have both energy and
capacity cost components that combine to reach the utilty's avoided cost rate. Contrary
to NIPPC's understanding expressed in its Petition for Reconsideration, the AURORA
model by itself does not result in the avoided cost price. It is merely used to arrive at
the avoided cost of energy component thereof. Idaho Power then adds a capital cost or
capacity component to the energy price to then determine the complete IRP-based cost.
Second, the argument that there is a "full avoided cost" standard is not correct.
None of the legal authorities cited by NIPPC establish "full avoided cost" as the legal
standard by which the Commission must establish a utilty's avoided cost rates that are
made available to a QF sellng energy to an electric utilty pursuant to the Public Utilty
Regulatory Policies Act of 1978 ("PURPA").
A. The IRP-Based Methodology Includes Both an Energy and a
Capacity. or Fixed. Cost Component.
Beyond its alleged procedural infirmities, NIPPCs only alleged substantive error
by the Commission appears to be that the IRP methodology for establishing avoided
costs does not reflect the utilty's "full avoided cost." NIPPC's Petition for
Reconsideration, pp. 13-16. As support for this position, NIPPC submits, for the first
time, a "White Papet' prepared by its consultant entitled Implementation of the IRP
Methodology for Calculating Avoided Cost Rates in Idaho. NIPPC describes this "White
Papet' as "demonstrating that the IRP methodology, as currently implemented, simply
fails to account for capacity." Id. at p. 12. NIPPC alleges that there is no capacity cost
component in the IRP-based avoided cost methodology, and thus provides an energy
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 8
only price, and that the methodology is not consistent with how the Utilties calculate the
cost of new resources in the IRP process. Id. Both allegations are incorrect.
These allegations are based upon NIPPC's own failure to understand the IRP-
based avoided cost methodology because, in fact, the IRP methodology does contain a
capacity component to the avoided cost price. The IRP methodology, which has been
an approved, vetted, and accepted avoided cost methodology for over 16 years, utilzes
AURORA modeling to arrive at the avoided cost of energy price component for the
resultant avoided cost rate that is calculated with this methodology. However, NIPPC
assumes that the AURORA output is the end result avoided cost rate, which it is not.
Once AURORA is utilzed to establish an avoided cost of energy price based upon the
specific generation profile of the proposed QF generation resource, a capacity, or fixed,
cost credit using a combined-cycle combustion turbine ("CCCT") as a surrogate
resource is added to the value of the energy calculated in the AURORA modeL.
NIPPC's argument that the capacity component is lacking from the IRP-based
methodology, and thus the IRP-based avoided cost calculation is something less than
the "full" avoided cost, is simply wrong.
The Commission noted in Order No. 32176 that the IRP methodology has been
an approved method for establishing a utilty's avoided cost rate for PURPA QFs since
1995. In Order No. 26576, Case No. IPC-E-95-09, the Commission approved an IRP-
based avoided cost methodology that was outlined in the testimony for that case by
Commission Staff Engineer Rick Sterling. The IRP-based methodology outlined in Mr.
Sterling's testimony, and approved and instituted by the Commission, consisted of the
following:
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 9
1. An IRP is prepared by the utilty. The IRP should
consider a range of load forecasts for various sets of
possible economic conditions. The IRP should also
consider all possible resources for meeting load, both
supply side and demand side. In addition,
consideration should also be given to the risks and
uncertainties associated with each scenario
examined. The least cost combination of resources is
selected to meet each scenario. The most likely
scenario is identified as the base case plan.
2. An initial simulation analysis using a power supply
and/or capacity expansion model chosen by the utilty
is used to calculate the present value of revenue
requirements (PVRR) of the base case resource plan
over the lifetime of the proposed QF contract.
3. The proposed QF resource is added to the base case
resource plan during all years of the proposed
contract. The required description of the QF project
includes all data and information needed to model the
intended dispatchable or non-dispatchable operation
of the project on the power supply system.
4. A second simulation analysis, including the QF
resource, is performed which results in an adjustment
of the amount and/or timing of the new resources in
the base case plan. The modified plan including the
QF purchase is constructed to maintain resource
adequacy and system reliability equivalent to that of
the base case plan.
5. The PVRR of the modified resource plan including the
QF is calculated over the full term of the QF contract,
excluding the total purchase costs of the QF resource
itself.
6. Finally, the present value of the QF project avoided
cost is calculated by subtracting the PVRR of the
modified plan, with the costs of the QF set to zero,
from the PVRR of the base case resource plan.
7. Rates for capacity and energy from the QF project
can then be developed for which, on a present value
basis, the expected payments to the QF are equal to
the project's avoided cost over the life of the contract.
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 10
Case No. IPC-E-95-09, Sterling, Direct pp. 6-8 (June 14, 1996).
Since Order No. 26576 was issued in 1995, Idaho Power has followed this IRP-
based methodology to calculate avoided cost rates as directed by the Commission.
First, the value of energy from a proposed QF project is determined by calculating an
avoided cost based upon the project's forecast energy deliveries to Idaho Power
throughout the term of the contract (the "Study Case"). In the Study Case, the
AURORA model is used to simulate how the energy received from a proposed QF
project would displace the cost of other resources in the preferred portolio identified in
Idaho Powets IRP. The total cost of the Study Case is then compared to the total cost
of the preferred portolio from the IRP (the "Base Case"), with the difference being the
gross avoided cost of energy.
Second, a capacity (fixed) cost credit using a CCCT as a surrogate resource is
added to the value of the energy calculated in the AURORA a modeL. Finally, the
stream of annual avoided costs (for energy and capacity) is uniformly escalated and
then discounted using Idaho Powets weighted average cost of capital to establish a
levelized avoided cost rate for the proposed QF project. The fixed cost credit is based
on the QF project's capacity factor during the hours from 3:00 p.m. to 7:00 p.m. in the
month of July. A 90th percentile criterion is used to determine the capacity factor for
intermittent wind and solar PURPA projects, which is consistent with the peak-hour
planning criteria Idaho Power uses in the IRP process.
NIPPC was provided with this information, and the above-stated explanation as
to how the IRP methodology uses the avoided cost of energy established by 'use of
AUROA modeling and a capacity/fixed cost component to arrive at an avoided cost rate
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 11
in response to a request for production on February 25, 2011. See Idaho Powets
Response to NIPPC's Sixth Production Request No. 68, attached hereto as Attachment
No.1, and incorporated herein by this reference.
The IRP-based methodology does contain a capacity, or fixed, cost component
and the methodology is consistent with and shares some of the calculations utilzed in
Idaho Powets IRP process. The Commission's Order No. 32176 did not create any
new avoided cost rate methodology. The Order reduced the published, or standard,
rate eligibilty from 10 aMW to 100 kW for only wind and solar based QFs. The IRP-
based methodology is an existing, vetted, valid, approved, and accepted method of
establishing a utility's avoided cost.
B. Commission Precedent Exists for Using the IRP-Based Methodology
for Establishing Avoided Costs.
As described above, the Commission has accepted the IRP-based methodology
as an existing, valid, approved process for establishing a utilty's avoided costs. In fact,
the Commission currently requires the use of the IRP methodology to determine the
starting point for avoided cost negotiations for QFs larger than 10aMW. If the IRP-
based methodology for setting avoided cost rates somehow violates PURPA and
Federal Energy Regulatory Commission ("FERC") rules, as alleged by NIPCC, then the
Commission's existing, well-established rule for using the IRP-based methodology as
the basis for pricing QF projects larger than 10 aMW would necessarily have to violate
PURPA and FERC rules as welL. It does not. As a matter of policy and at the discretion
afforded to it by PURPA and FERC rules, the Commission had set, until Order No.
32176, the published avoided cost rate eligibility cap at 10 aMW. However, there have
been at least two other occasions where this Commission has set the published avoided
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION -12
cost rate at something less than 10 aMW, and required QFs and the electric utilties to
use the IRP-based methodology to determine avoided costs for the purposes of electric
utilty purchases of QF-generated energy.
In Case No. IPC-OE-93-28, this Commission set the published avoided cost rate
eligibility cap at 1 MW, concluding that "(r)atepayers should not be asked to subsidize
the QF industry through the establishment of avoided costs rates that exceed utilty
costs that would result from an effective least cost planning process. Reducing the
threshold (to 1 MW) correspondingly reduces the risk associated with published rates
being set either too high or too low." Order No. 25884, p 5. Just as importantly, this
Commission has previously found that requiring an IRP-based methodology for
determining avoided cost rates balances both consumer and QF interests, finding that
"(r)atepayers wil not be disadvantaged and QFs wil be treated fairly and consistently
with the requirements and goals of PURPA." Order No. 25884, p.6.
In Case No. IPC-E-05-22, the Commission, similar to what it has done in this
case, adjusted the avoided cost rate cap from 10 aMW down to 100 kW for QF wind
generators so as to examine wind integration issues on Idaho Powets system. Order
No. 29872, See also Joint Petition to Address Avoided Cost Issues and Joint Motion to
Adjust the Published Avoided Cost Rate Eligibilty Cap, GNR-E-10-04, pp. 2-3. During
the time when the published rate eligibilty cap was reduced to 100 kW in IPC-E-05-22,
the Commission required the use of an IRP-based methodology as the basis for
avoided cost negotiations with QFs.
Thus, this Commission has used, and is currently using, an IRP-based
methodology as the basis to determine a utilties' avoided cost rates for the purposes of
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 13
QF contracts. There is no basis in law, FERC rules, or the precedent set by this
Commission to support NIPPC's argument that reducing the published avoided cost
eligibility cap from 10 aMW to 100 kW is ilegaL.
c. There Is No "Full Avoided Cost" Standard.
FERC has defined "avoided cost" as "the incremental costs to an electric utilty of
electric energy or capacity or both which, but for the purchase from the qualifying facilty
or qualifying facilties, such utilty would generate itself or purchase from another
source." 18 C.F.R. § 292.101(b)(6). FERC has no rule defining a "full avoided cost"
standard as suggested in NIPPC's Petition for Reconsideration.
NIPPC's Petition for Reconsideration repeatedly uses the phrase "full avoided
costs," suggesting that this Commission has both a statutory as well as a FERC-
imposed obligation to have electric utilties pay "full avoided cost" rates for energy that
they purchase from QFs. See generally NIPPC's Petition for Reconsideration, pp. 10-
14. Nowhere does NIPPC define what the phrase "full avoided costs" means.
However, NIPPC's Petition for Reconsideration persists in alleging that the Surrogate
Avoided Resource ("SAR") methodology is "the published rate methodology which more
accurately reflects the Utilties' full avoided cost" and that:
Federal law requires the utilties to contract with each QF at
the full avoided cost rates. 16 U.S.C. § 824a-3(b), (d); 18
C.F.R. § 292.304(a), (b); see also Small Power Production
and Cogeneration Facilities; Regulations Implementing
Section 210 of the Public Utilty Regulatory Act of 1978, 45
Fed. Reg. 12,214 ("PURPA Implementation Ordet'), 12,222-
12, 223 (Feb. 25, 1980).
NIPPC's Petition for Reconsideration, p. 13. Although NIPPC's Petition for
Reconsideration contains the citation above to PURPA (U.S.C), FERC rules (C.F.R.),
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 14
and FERC's order implementing PURPA as authority that "full avoided costs" is
somehow the standard by which QF pricing must be based, none of these legal
authorities support their argument.
The provisions of PURPA set forth in the United States Code, do not provide for
a "full avoided cost" standard, nor do they obligate state commissions to ensure that QF
revenues are being maximized by being paid an electric utilties "full avoided costs."
Specifically, 16 U.S.C § 824a-3(b) states:
The rules prescribed under subsection (16 U.S.C. § 824a-
3(a)) shall insure that, in requiring any electric utilty to offer
to purchase electric energy from any qualifying cogeneration
facilty or small qualifying power production facilty, the rates
for such purchase-
(1) Shall be just and reasonable to the electric
utilty and in the public interest; and
(2) Shall not discriminate against qualifying
cogenerators or qualifying small power producers.
No such rule prescribed (by FERC) shall provide for a rate
which exceeds the incremental costs to the electric utilty of
alternative energy.
Nowhere is the phrase "full avoided costs" defined in the statute cited by NIPPC's
Petition. 16 U.S.C. § 824a-3(d), the portion of the statute that NIPPC cites for the
authority that there is a federal requirement that utilties contract with each QF at the
"full avoided cost rates" states:
(d) "Incremental cost of alternative electric energy"
defined
For purposes of this section, the term
"incremental cost of alternative electric energy"
means, with respect to electric energy
purchased from a qualifying cogenerator or
qualifying small power producer, the cost of the
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 15
electric utiity of the electric energy which, but
for the purchase from such cogenerator or
small power producer, such utilty would
generate or purchase from another source.
Again, NIPPC cites to a statute which provides no support for its argument. There is no
statutory standard in the United States Code's PURPA sections known as "full avoided
costs" as stated by NIPPC.
The FERC regulations contained in the Code of Federal Regulations, do not
contain a "full avoided cost" standard. The FERC regulation cited by the NIPPC
Petition, 18 C.F.R. § 292.304(a), (b), also fails to provide any explanation as to what
NIPPC means when it argues "Federal law requires the utilties to contract with each QF
at full avoided cost rates." Section 292.304(a) of the FERC rules merely reiterates the
statutory requirement that rates for purchases from QFs must "be just and reasonable to
the electric consumer of the electric utility and in the public interest" and "not
discriminate against qualifying cogeneration and small power production facilties." In
addition, 18 C.F.R. 292.304(a)(2) cautions that "nothing in this subpart requires any
electric utilty to pay more than the avoided costs for purchases." Section 292.304(b)
explains the relationship between the electric utilties avoided costs and the rates at
which utilities must purchase QF energy, noting that rates for purchases of QF energy
wil be deemed just and reasonable and nondiscriminatory if the rate equals the electric
utilties' avoided costs after consideration "to the extent practicable" the eleven factors in
18 C.F.R. § 292.304(e). Thus, there is nothing in the regulations describing what
constitutes "full avoided costs" and, more importantly, nothing in the regulations to
suggest that the IRP methodology does not comport with FERC rules.
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 16
In addition, the NIPPC Petition cites to language in FERC's PURPA
Implementation Order as a basis for its argument that the IRP methodology is
inappropriate for determining a utility's avoided costs, stating that the FERC order
"directly reject(ed) proposals to provide QFs with rates of less than the full avoided
costs." NIPPC's Petition for Reconsideration, p. 13. The issue relating to "full avoided
costs" as described in the Federal Register cited by NIPPC had to do with whether rates
a utilty pays for QFs should be based upon the electric utilties' avoided costs, the QF
generators' costs, or some other metric; it had nothing to do with whether an IRP
methodology appropriately encompasses an electric utilties' avoided costs. See
PURPA Implementation Order, 45 Fed.Reg. 12,222. The notion of "full avoided costs"
as used in the PURPA Implementation Order had to do with a debate occurring in the
late 1970s among FERC commentators related to a "split-the-savings" approach of
pricing QF energy, whereby an electric utilty's customers and the QF generator would
equally split any potential savings realized by the electric utilty purchasing QF energy
that may be cheaper than what the electric utilty could produce. Id. In rejecting this
suggestion, FERC determined setting the purchase rate at the electric utilties' avoided
costs was more appropriate. Id.
NIPPC's Petition for Reconsideration also argues that this "Commission should
re-instate the 10 aMW published avoided cost rate eligibilty cap for wind and solar
projects because failure to do so constitutes a failure to implement PURPA's mandatory
purchase obligation at each utilty's full avoided costs." NIPPC Petition, p. 14 (emphasis
in original). In support of this argument, NIPPC asserts, as a matter of law, that "If a
state utilty commission does not require the utilties within its jurisdiction to pay the full
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 17
avoided costs for QF output, the state commission would be in violation of FERC's rules
and subject to FERC enforcement action, or federal court challenge to its
implementation of PURPA. See 16 U.S.C. § 824(sic)-3(f), (h)." This assertion grossly
misrepresents the statute. There is nothing in either 16 U.S.C. §824a-3(f) or (h) which
requires state utilty commissions to "implement PURPA's mandatory purchase
obligation at each utilty's full avoided cost." Section 824a-3(f) and (h) speak generally
to the PURPA enforcement process, not specifically to avoided cost calculations. It is
clearly settled as to how PURPA is to be enforced.
Section 210 sets out a self-contained scheme by which the
purposes of the PURPA are to be realized. (citation omitted)
The FERC is to promulgate rules that wil encourage
cogeneration. 16 U.S.C. § 824a-3(a). The public utilty
commission (PUC) of each state must implement those
rules, § 824a-3(f), and the Commission may bring an
enforcement action in federal district court against any state
regulatory authority that fails to do so. §§ 824a-3(h)(2)(A),
(B). A private party may petition the FERC to initiate such
an enforcement action and, if the FERC declines, may itself
sue the state PUC in district court. § 824a-3(h)(2)(B).
Niagara Mohawk Power Corp. v. F.E.R.C., 117 F.3d 1485, 1488 (D. D.C. 1997).
NIPPC's Petition for Reconsideration, however, continues to suggest the "full avoided
cost" standard, implying there is some unique standard and enforcement process for a
state public utility commission's failure to ensure electric utilities are paying QFs "full
avoided costs" for power purchased from them.
In its Petition for Reconsideration, NIPPC has attached itself to the phrase "full
avoided costs" and inappropriately extrapolated it in an attempt to get this Commission
to reconsider its decision in Order No. 32176. NIPPC suggests a false standard-Le.,
"full avoided cost"-and argues the IRP methodology fails to meet that standard. As
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 18
described above, there is no such standard as a "full avoided cost" standard, nor does
NIPPC's Petition for Reconsideration provide any compellng argument that an IRP
methodology fails to comport with PURPA and FERC rules in setting the rate at which
electric utilties must purchase energy from QFs.
II. THE COMMISSION'S DECISION WAS A PROPER EXERCISE OF ITS
DISCRETION IN ITS IMPLEMENTATION OF PURPA
The Commission's Order No. 32176 reduced the published, or standard, avoided
cost rate eligibilty from 10 aMW to 100 kW for wind and solar based PURPA QFs. As
the Commission correctly noted in its Order, it is required by federal regulations to make
standard, or published, avoided cost rates available for QF projects with a design
capacity of 100 kW or less. 18 C.F.R. § 292.304(c). The Commission mayor may not
extend the eligibilty for standard rates to QF projects that are larger than 100 kW in its
sole discretion. Id. Federal law requires the encouragement of small power production
or cogeneration facilties less than 80 MW by requiring utilties to purchase power from
QFs at the utilties' avoided cost. It does not require, nor allow, the stimulation or
encouragement of QF development by setting an avoided cost price that in any way
exceeds the utilties' avoided cost. Contrary to NIPPC's implications, there is no
entitlement, beyond that granted at the discretion of the Commission, to standard rates
for any QF larger than 100 kW.
In Order No. 32176, the Commission found, "In establishing a published rate, the
Commission may differentiate among QFs using various technologies on the basis of
supply characteristics of the different technologies; the availabilty of capacity and
energy during daily and seasonal peaks; dispatchabilty; reliabilty; and other factors."
Order No. 32176, pp. 9-10, citing 18 C.F.R. § 292.304(c)(3); In re California PUC, Order
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 19
Granting Clarification and Dismissing Rehearing, 133 FERC 61,059 (October 21, 2010),
,- 23. FERC has recently reaffirmed its decision cited above in this regard, stating "the
avoided cost rate may take into account the cost of electric energy from the generators
being avoided, e.g. generators with certain characteristics." In re California PUC, Order
Denying Rehearing 134 FERC 61,044 (January 20,2011),,- 30. Unlike the SAR-based
published rate which sets avoided capacity costs based upon a fictional CCCT which
relies heavily upon the Northwest Power and Conservation Council's natural gas price
forecast, the IRP-based methodology takes into account the unique factors
acknowledged by this Commission in Order No. 32176 and by FERC.
FERC has also held that:
. . . states are allowed a wide degree of latitude in
establishing an implementation plan for section 210 of
PURPA, as long as such plans are consistent with our
regulations. Similarly, with regard to review and
enforcement of avoided cost determinations under such
implementation plans, we have said that our role is generally
limited to ensuring that the plans are consistent with section
210 of PURPA and the regulations. . .
American REF-FUEL Company of Hempstead, 47 FERC 61,161 at 61,533 (1989); see
also Signal Shasta, 41 FERC 61,120 (1987). NIPPC has provided no evidence to
suggest that FERC would retract from its current policy of giving state commissions,
including this Commission "a wide degree of latitude" in establishing its PURPA policy
and setting avoided cost rates.
NIPPC's Petition asserts that FERC rules require this Commission to adhere to
"eight distinct provisions" in implementing avoided cost rules. NIPPC's Petition for
Reconsideration, pp. 10-11 (citing 18 C.F.R. § 292.304(e)). The Petition then goes on
to misstate those "eight distinct provisions" as follows:
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 20
. . . (1) reliabilty, (2) contract terms, (3) abilty to schedule
outages, (4) abilty to provide service in emergencies, (5)
contribution to the system in aggregate with other QFs, (6)
contribution to savings due to shorter construction times, (7)
abilty to allow the utilty to avoid fossil fuel risk, and (8)
abilty to allow the utilty to avoid line loses.
Id. Section 292.304(e) of FERC's rules lists eleven "factors affecting rates for
purchases" to be considered, "to the extent practicable," in setting rates for purchases
by which electric utilties must purchase energy from qualifying facilties. Section
292.304(e) lists those eleven factors as follow:
In determining avoided costs, the following factors shall, to
the extent practicable, be taken into account:
(1) The data provided pursuant to (avoided cost data
filings required to be submitted biennially by electric
utilities), including State review of any such data;
(2) The availabilty of capacity or energy from a qualifying
facility during the system daily and seasonal peak
periods, including:
(i) The ability of the utilty to dispatch the
qualifying facility;
(ii) The expected or demonstrated reliabilty of the
qualifying facilty;
(iii) The terms of any contract or other legally
enforceable obligation, including the duration of
the obligation, termination notice requirement
and sanctions for non-compliance;
(iv) The extent to which scheduled outages of the
qualifying facility can be usefully coordinated
with scheduled outages of the utilty's facilties;
(v) The usefulness of energy and capacity
supplied from a qualifying facility during system
emergencies, including its ability to separate its
load from its generation;
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 21
(vi) The individual and aggregate value of energy
and capacity from qualifying facilties on the
electric utilty's system; and
(vii) The smaller capacity increments and the
shorter lead times available with additions of
capacity from qualifying facilties; and
(3) The relationship of the availability of energy or
capacity from the qualifying facilty as derived in (sub-
paragraph 2 above), to the abilty of the electric utilty
to avoid costs, including the deferral of capacity
additions and the reduction of fossil fuel use; and
(4) The costs or savings resulting from variations in line
losses from those that would have existed in the
absence of purchases from a qualifying facility, if the
purchasing electric utility generated an equivalent
amount of energy itself or purchased an equivalent
amount of electric energy or capacity.
NIPPC's Petition not only incorrectly cites the rule, it then goes on to make the assertion
that the "IRP Methodology fails to even attempt to take each of these eight factors into
account, and therefore violates FERC's guidelines."NIPPC's Petition for
Reconsideration, p. 11.
Importantly, in calculating avoided cost rates, the IRP methodology considers the
eleven factors identified above in a more comprehensive manner than does the SAR
methodology. In any event, upon review of the correct wording of the eleven factors,it
cannot be said that a fatal flaw exists with either avoided cost methodology for a failure
to consider the factors suggested "to the extent practicable" by FERC.
Contrary to NIPPC's assertion, this Commission has no duty to ensure that QF
generators are receiving the electric utilties "full avoided costs" in setting the rate at
which electric utilities must purchase QF energy. Instead, the standard is that the rate
must be just and reasonable to the electric utilties' customers, in the public interest, and
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 22
not discriminatory to the QF developer. 16 U.S.C. § 824a-3(b). Indeed, several courts
have held that a state commission must ensure that an electric utilty is not paying more
than the electric utilties' avoided cost. "The failure of a state commission to ensure that
a rate does not exceed a utilty's avoided cost is a failure to comply with a (FERC)
regulation implementing the PURPA." Connecticut Valley E1ec. Co. v. FERC, 208 F.3d
1037, 1043 (D. D.C. 2000) citing New York State E1ec. & Gas Corp. v. F.E.R.C., 117
F.3d 1473, 1476 (D. D.C. 1997).
Put differently, NIPPC's argument is the exact opposite of what PURPA and
FERC rules require. NIPPC argues this Commission should do everyhing to maximize
the amount electric utilties pay to QF generators by requiring utilties to pay "full
avoided costs," a phrase, which as described above, NIPPC has taken out of context
and incorrectly uses to bolster its position. PURPA and FERC regulations set the
threshold at the utilty's actual avoided costs and state that it is a violation of PURPA
and FERC rules for utilities to pay more than their actual avoided costs. 16 U.S.C. §
824a-3(a); 18 C.F.R. § 292.304(a)(2) and supra. NIPPC has failed to provide any
compellng evidence that the IRP Methodology results in rates that are anything short of
the utilties' avoided costs.
iv. CONCLUSION
NIPPC has failed to demonstrate that the Commission's Order No. 32176, or any
issue decided in that Order, is unreasonable, unlawful, erroneous, or not in conformity
with the law. NIPPC has failed to provide any persuasive legal authorities to support its
Petition for Reconsideration. The Commission's Order No. 32176 is based upon
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 23
substantial and competent evidence in the record and reconsideration should be
denied.
Respectfully submitted this 7th day of March 2011.
&&cL
DONOVAN E. WALKER
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 24
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 7th day of March 2011 I served a true and
correct copy of the IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST
AND INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR
RECONSIDERATION upon the following named parties by the method indicated below,
and addressed to the following:
Commission Staff
Donald L. Howell, II
Kristine A. Sasser
Deputy Attorneys General
Idaho Public Utilties Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
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U.S. Mail
_ Overnight Mail
FAX
-2 Email don.howell((puc.idaho.gov
kris.sasser((puc. idaho.gov
Avista Corporation
Michael G. Andrea
Clint Kalich
Avista Corporation
1411 East Mission Avenue - MSC-23
P.O. Box 3727
Spokane, Washington 99220-3727
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-2 U.S. Mail
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FAX
-2 Email michael.andrea((avistacorp.com
clint. kalich((avistacorp.com
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
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-2 U.S. Mail
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FAX
-2 Email daniel.solander((pacificorp.com
ted. weston((pacificorp.com
Kenneth Kaufmann
LOVINGER KAUFMANN, LLP
825 NE Multnomah, Suite 925
Portland, Oregon 97232
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FAX
-2 Email kaufmann((lklaw.com
Bruce Griswold
PacifiCorp
825 NE Multnomah
Portland, Oregon 97232
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-2 U.S. Mail
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-2 Email bruce.griswold((pacifiCorp.com
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 25
Exergy, Grand View Solar, J. R. Simplot,
Northwest and Intermountain Power
Producers Coalition, & Board of
Commissioners of Adams County, Idaho
Peter J. Richardson
Gregory M. Adams
RICHARDSON & O'LEARY, PLLC
515 North 27th Street
P.O. Box 7218
Boise, Idaho 83702
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 92241
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
P.O. Box 1211
Welches, Oregon 97067-1211
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-2 U.S. Mail
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-2 Email peter((richardsonandoleary.com
greg((richardsonandoleary.com
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-2 Email jcarkulis((exergydevelopment.com
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-2 Email robertapaul08((gmail.com
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-2 Email don.sturtevant((simplot.com
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-2 Email rkahn((nippc.org
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-2 Email nelson((thnelson.com
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 26
John R. Lowe, Consultant
Renewable Energy Coalition
12050 SW Tremont Street
Portland, Oregon 97225
Cedar Creek Wind, LLC, & Dynamis
Energy, LLC
Ronald L. Willams
WILLIAMS BRADBURY, P.C.
1015 West Hays Street
Boise, Idaho 83702
Cedar Creek Wind, LLC
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
Dynamis Energy, LLC
Wade Thomas, General Counsel
Dynamis Energy, LLC
776 East Riverside Drive, Suite 15
Eagle, Idaho 83616
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
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-2 U.S. Mail
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-2 Email jravenesanmarcos((yahoo.com
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-2 Email ron((willamsbradbury.com
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-2 Email scott((westernenergy.us
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-2 Email dzentz((summitpower.com
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-2 Email wthomas((dynamisenergy.com
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-2 Email glenni((EnvisionWind.com
Margaret((EnvisionWind .com
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-2 Email greg((mimuralaw.com
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 27
Bil Piske, Manager
Interconnect Solar Development, LLC
1303 East Carter
Boise, Idaho 83706
Intermountain Wind LLC
Dean J. Miler
McDEVln & MILLER LLP
420 West Bannock Street
P.O. Box 2564
Boise, Idaho 83701
Paul Martin
Intermountain Wind LLC
P.O. Box 353
Boulder, Colorado 80306
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
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.. Email bilpiske((cableone.net
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.. Email joe((mcdevitt-miller.com
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.. Email paulmartin((intermountainwind.com
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IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 28
Board of Commissioners of Adams
County, Idaho
Bil Brown, Chair
Board of Commissioners of
Adams County, Idaho
P.O. Box 48
Council, Idaho 83612
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-- Email bdbrown((frontiernet.net
Birch Power Company
Ted S. Sorenson, P.E.
Birch Power Company
5203 South 11 th East
Idaho Falls, Idaho 83404
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Blue Ribbon Energy LLC
M. J. Humphries
Blue Ribbon Energy LLC
4515 South Ammon Road
Ammon, Idaho 83406
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-- Email blueribbonenergy((gmail.com
Arron F. Jepson
10660 South 540 East
Sandy, Utah 84070
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-- Email
Donovan E. Walker
IDAHO POWER COMPANY'S ANSWER TO THE NORTHWEST AND
INTERMOUNTAIN POWER PRODUCERS COALITION'S PETITION FOR RECONSIDERATION - 29
BEFORE THE
IDAHO PUBLIC UTiliTIES COMMISSION
CASE NO. GNR-E-10-04
IDAHO POWER COMPANY
ATTACHMENT NO.1
DONOVAN E. WALKER (ISB No. 5921)
LISA D. NORDSTROM (ISB No. 5733)
Idaho Power Company
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
dwa I ker((idahopower. com
Inordstrom((idahopower.com
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 MAnER OF THE JOINT
PETITION OF IDAHO POWER
COMPANY, AVISTA CORPORATION,
AND PACIFICORP DBA ROCKY
MOUNTAIN POWER TO ADDRESS
AVOIDED COST ISSUES AND TO
ADJUST THE PUBLISHED AVOIDED
COST RATE ELIGIBILITY CAP.
)
) CASE NO. GNR-E-10-Q4
)
) IDAHO POWER COMPANY'S
) RESPONSE TO THE SIXTH
) PRODUCTION REQUEST OF THE
) NORTHWEST AND
) INTERMOUNTAIN POWER
) PRODUCERS COALITION TO THE
) JOINT UTILITIES
)
COMES NOW, Idaho Power Company ("Idaho Powet' or "Company"), and in
response to the Sixth Production Request of the Northwest and Intermountain Power
Producers Coalition to the Joint Utilties dated February 4, 2011, herewith submits the
following information:
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 1
REQUEST NO. 67: Reference the transcript of oral argument before the Idaho
Public Utilties Commissions on January 27,2011 at pages 18 -19, wherein Mr. Walker
asserted:
Idaho Power in its reply comments disclosed that the
softare provider for its modeling program, AURORA, had
advised us that there may be some kind of modeling
problems with that softare for vey (sic) small projects under
two megawatts in size and we disclosed that in our reply
comments, and prior to that time Idaho Power has not been
required to run AURORA on projects that small and in fact,
we have not run projects smaller than two megawatts
through the AURORA modeling, and for several of the
reasons that we've outlined in our documents, we had
received no requests from anyone to run AURORA pricing
for avoided costs for projects that low either.
However, since the time, sincé January 19th at the time when
we filed our reply comments, obviously, we've been working
on this issue, we consulted with Avista and found out that
Avista routinely runs their AURORA modeling for 100
kilowatt projects as part of their IRP process. Also the
Company's analysts also ran several test modelings at 100
kilowatt levels and the Company is confident that the
modeling does result in accurate and usable results for
projects smaller than two megawatts. . .
Also reference id. at page 20, wherein Mr. Walker asserted:
Well, first of all, Madam Commissioner, the Company never
did state anywhere that the AURORA modeling was flawed,
so we object to that characterization . . .
(a) Please reconcile the assertion quoted above that the "Company never did
state anywhere that the AURORA modeling was flawed" with Idaho Powets Reply
Comments at p. 13 stating:
If the project is small enough that it does not trigger changes
in the base model operations, Le., it is lost in the rounding to
MWs or MWhs, then the base model results could be
identical to the modeled results that include the project. This
would result in an AURORA pricing of zero.
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 2
While Idaho Power believes using the I RP-based
methodology for any project above 100 kW is the right
answer, there are some limitations to modeling projects
below a certain size. To remedy this situation, Idaho Power
proposes to work with Staff to reach an appropriate solution
(b) Please identify the "Company's analysts" who "also ran several test
modelings" and provide the models they ran along with all supporting work papers.
(c) For Avista, please identify the individuals at the company who were
"consulted with" by Idaho Power, the dates of said consultations and provide a summary
of the consultations. Please provide copies of all information, studies or models provide
(sic) to Idaho Power regarding AURORA and its abilty to estimate avoided costs for
projects larger than 100 kW.
(d) For Idaho Power please identify the individuals at the company who "ran
several test modelings" and provide a copy of the results of the test modelings along
with supporting work papers.
(e) For Idaho Power, please identify the individuals at the company who
"consulted with" Avista, the dates of said consultations and provide a summary of the
consultations. Please provide copies of all information, studies or models provide (sic)
to Idaho Power by Avista regarding AURORA and its abilty to estimate avoided costs
for projects larger than 100 kW.
(f) For Avista and Idaho Power, please provide copies of and supporting work
papers for the three most recent iterations of Avista's "routin(e) . . . runs (of) their
AURORA modeling for 1 00 kilowatt projects as part of their IRP process."
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 3 .
(g) Has Idaho Power had any communications "with Staff to reach an
appropriate solution"? If so, please summarize those communications, identify and
provide copies of any documents exchanged as part of those communications.
(h) For Idaho Power, please provide all additional evidence supporting the
claim in Mr. Waltets (sic) oral argument that AURORA yields accurate results for QF
projects smaller than 2 MW.
RESPONSE TO REQUEST NO. 67:
(a) The quoted language in Northwest and Intermountain Power Producers
Coalition's ("NIPPC") Request No. 67(a) from Idaho Powets Reply Comments does not
state that the AURORAm~ ("AURORA") modeling was flawed; thus, NIPPC's request
to "reconcile" the statements is unclear, as the two statements are consistent with each
other.
(b) Richard Pagoaga, Senior Power Supply Planning Analyst; Tom Noll,
Senior Power Supply Planning Analyst; and Philp DeVol, Power Supply Planning
Leader, were involved with running AURORA test models. Attached is a table summary
of the analysis showing the AURORA avoided cost of energy results run at 100
kilowatts ("kW"), 2 megawatts ("MW"), 10 MW, and 80 MW. This table shows only the
avoided cost of energy modeled by AURORA, and does not contain the avoided cost of
capacity component, which is added to the value of the energy in determining the total
avoided cost rate. As can be seen in the table, the avoided cost of energy modeled at
100 kW did not give consistent annual results, just as disclosed by Idaho Power in its
Comments. However, Idaho Power is confident that AURORA can be utilzed to
appropriately determine an avoided cost of energy for any potential PURPA generation
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 4
project. From Idaho Powets review of the "base case vs. study case" approach, on a
per megawatt-hour ("MWh") basis, a project's avoided cost of energy can be assumed
to be comparable independent of nameplate capacity. Modeling suggests that the
avoided cost of energy for same type resources with identical operating characteristics
is comparable on a per MWh basis for projects sized from 10 MW to 80 MW. The
Company believes the avoided cost of energy on a per MWh basis determined for a 10
average megawatt ("aMW") project could be applied to all projects of the same tye
producing less than 10 aMW.
(c) As this question is directed to Avista only, please see Avista's response to
NIPPC's Request No. 67(c).
(d) Please see the Company's Response to NIPPC's Request No. 67(b)
above.
(e) Richard Pagoaga, Senior Power Supply Planning Analyst; Tom Noll,
Senior Power Supply Planning Analyst; and Randy Airphin, Senior Power Supply
Energy Contracts Coordinator, from Idaho Power consulted with Clint Kalich and Mr.
Gall from Avista regarding the use of AURORA modeling for projects smaller than 2
MW. The first such consultation was on January 21, 2010, with a second consultation
on January 26, 2010. Idaho Power described how it used AURORA to calculate the
avoided cost of energy for PURPA projects and Avista described how it used 100 kW
resources in AURORA for its Integrated Resource Plan ("IRP") modeling. There were
no materials provided or exchanged.
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 5
(f) Idaho Power was not provided with nor does it possess copies of, and/or
supporting work papers for, the three most recent iterations of Avista's runs of their
AURORA modeling for 100 kW projects as part of their IRP process.
(g) No.
(h) There are two methods in the AURORA electric market model to value the
avoided cost of energy using the IRP methodology. First, there is the "mark-to-market"
approach where the hourly market price calculated in AURORA is multiplied by the
PURPA project's hourly generation to derive the avoided cost of energy. Second, there
is the "base case vs. study case" approach (the method Idaho Power currently uses)
where, in the study case, AURORA is used to simulate how the energy received from
the proposed PURPA project would displace the cost of other resources in the preferred
portolio from Idaho Powets IRP. The total cost of the study case is then compared to
the total cost of the preferred portolio from the IRP (the base case), with the difference
being the gross avoided cost of energy. On an annual basis, the gross avoided cost of
energy is divided by the forecasted annual generation from the proposed PURPA
project in order to derive an annual avoided cost for the energy. A capacity (fixed) cost
credit using a combined cycle combustion turbine as a surrogate resource is then added
and any applicable deductions are subtracted to calculate an adjusted avoided cost for
each year of the contract. The fixed cost credit is based upon the PURPA project's
capacity factor during the July hours from 3:00 p.m. to 7:00 p.m. For intermittent and
variable wind and solar PURPA projects, the 90 percent exceedance capacity factor
from these respective existing projects in Idaho Powets service territory is used.
Finally, the stream of avoided costs is uniformly escalated and then discounted using
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 6
Idaho Powets weighted average cost of capital to establish a levelized avoided cost
rate for the proposed PURPA project.
Idaho Power is confident that AURORA can be utilzed to appropriately
determine an avoided cost of energy for any potential PURPA generation project. From
Idaho Powets review of the "base case vs. study case" approach, on a per MWh basis,
a project's avoided cost of energy can be assumed to be comparable independent of
nameplate capacity. Modeling suggests that the avoided cost of energy for same type
resources with identical operating characteristics is comparable on a per MWh basis for
projects sized from 10 MW to 80 MW. The Company believes the avoided cost of
energy on a per MWh basis determined for a 10 aMW project could be applied to all
projects of the same type producing less than 10 aMW.
The response to this Request was prepared by Richard Pagoaga, Senior Power
Supply Planning Analyst, Idaho Power Company, in consultation with Donovan E.
Walker, Lead Counsel, Idaho Power Company.
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 7
REQUEST NO. 68: Please reference the transcript of Counsel for Avista's oral
argument before the Idaho Public Utilties Commission on January 27, 2011 at page 29
wherein Mr. Andrea stated:
I do want to address just really quickly Idaho Powets
concerns about the AURORA program working for two
megawatts or less. As Mr. Walker noted, Idaho Power has
worked with Avista over the past week or so to work on that
issue and I think they've come to the conclusion that they're
comfortable that it does in fact work.
(a) Please identify the personnel at Avista who "worked" with Idaho Power in
the two weeks prior to oral argument. Please also identify the personnel from Idaho
Power who they worked with.
(b) Please provide all documentation related to the work referenced in Mr.
Andrea's statement, including AURORA model runs, work papers and correspondence.
RESPONSE TO REQUEST NO. 68:
(a) & (b)As this question is directed to Avista only, please see Avista's
responses to NIPPC's Requests Nos. 68(a) and (b).
The response to this Request was prepared by Donovan E. Walker, Lead
Counsel, Idaho Power Company.
DATED at Boise, Idaho, this 25th day of February 2011.
DONOVANE. W
Attorney for Idah
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 25th day of February 2011 I served a true and
correct copy of the IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH
PRODUCTION REQUEST OF THE NORTHWEST AND INTERMOUNTAIN POWER
PRODUCERS COALITION TO JOINT UTILITIES upon the following named parties by
the method indicated below, and addressed to the following:
Commission Staff
Donald L. Howell, II
Kristine A. Sasser
Deputy Attorneys General
Idaho Public Utilties Commission
472 West Washington
P.O. Box 83720
Boise, Idaho 83720-0074
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-- Email don.howell((puc.idaho.gov
kris.sasser((puc.idaho.gov
Avista Corporation
Michael G. Andrea
Clint Kalich .
Avista Corporation
1411 East Mission Avenue - MSC-23
P.O. Box 3727
Spokane, Washington 99220-3727
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-- Email michael.andrea((avistacorp.com
clint.kalich((avistacorp.com
PacifiCorp d/b/a Rocky Mountain Power
Daniel E. So lander
J. Ted Weston
Rocky Mountain Power
201 South Main Street, Suite 2300
Salt Lake City, Utah 84111
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-- Email daniel.solander((pacificorp.com
ted. weston((pacificorp.com
Kenneth Kaufmann
LOVINGER KAUFMANN, LLP
825" NE Multnomah, Suite 925
Portland, Oregon 97232
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-- Email kaufmann((lklaw.com
Bruce Griswold
PacifiCorp
825 NE Multnomah
Portland,Oregon97232
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-- Email bruce.griswold((pacifiCorp.com
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 9
Exergy, Grand View Solar, J. R. Simplot,
Northwest and Intermountain Power
Producers Coalition, & Board of
Commissioners of Adams County, Idaho
Peter J. Richardson
Gregory M. Adams
RICHARDSON & O'LEARY, PLLC
515 North 27th Street
P.O. Box 7218
Boise, Idaho 83702
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 92241
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
P.O. Box 1211
Welches, Oregon 97067-1211
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_Email peter((richardsonandoleary.com
greg((richardsonandoleary.com
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-- Email jcarkulis((exergydevelopment.com
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-- Email robertapaul08((gmail.com
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-- Email don.sturtevant((simplot.com
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-- Email rkahn((nippc.org
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-- Email nelson((thnelson.com
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES -10
John R. Lowe, Consultant
Renewable Energy Coalition
12050 SW Tremont Street
Portland, Oregon 97225
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-2 Email jravenesanmarcos((yahoo.com
Cedar Creek Wind, LLC, & Dynamis
Energy, LLC
Ronald L. Wiliams
WILLIAMS BRADBURY, P.C.
1015 West Hays Street
Boise, Idaho 83702
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-2 Email ron((willamsbradburv.com
Cedar Creek Wind, LLC
Scott Montgomery, President
Cedar Creek Wind, LLC
668 Rockwood Drive
North Salt Lake, Utah 84054
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-2 Email scott((westernenergy.us
Dana Zentz, Vice President
Summit Power Group, Inc.
2006 East Westminster
Spokane, Washington 99223
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-2 Email dzentz((summitpower.com
Dynamis Energy, LLC
Wade Thomas, General Counsel
Dynamis Energy, LLC
776 East Riverside Drive, Suite 15
Eagle, Idaho 83616
Idaho Windfarms, LLC
Glenn Ikemoto
Margaret Rueger
Idaho Windfarms, LLC
672 Blair Avenue
Piedmont, California 94611
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-2 Email wthomas((dynamisenergy.com
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-2 Email glenni((EnvisionWind.com
Margaret((EnvisionWind.com
Interconnect Solar Development, LLC
R. Greg Ferney
MIMURA LAW OFFICES, PLLC
2176 East Franklin Road, Suite 120
Meridian, Idaho 83642
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-2 Email greg((mimuralaw.com
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 11
Bil Piske, Manager
Interconnect Solar Development, LLC
1303 East Carter
Boise, Idaho 83706
Intermountain Wind LLC
Dean J. Miler
McDEVln & MILLER LLP
420 West Bannock Street
P.O. Box 2564
Boise, Idaho 83701
Paul Martin
Intermountain Wind LLC
P.O. Box 353
Boulder, Colorado 80306
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
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.. Email bilpiske((cableone.net
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.. Email paulmartin((intermountainwind.com
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.. Email smd((idahowaters.com
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.. Email olmstead((tfcanal.com
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.. Email nscanal((cableone.net
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.. Email bdbrown((frontiernet.net
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES -12
Birch Power Company
Ted S. Sorenson, P.E.
Birch Power Company
5203 South 11 th East
Idaho Falls, Idaho 83404
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-2 Email ted((tsorenson.net
Blue Ribbon Energy LLC
M. J. Humphries
Blue Ribbon Energy LLC
4515 South Ammon Road
Ammon, Idaho 83406
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-2 Email blueribbonenergy((gmail.com
Arron F. Jepson
Blue Ribbon Energy LLC
10660 South 540 East
Sandy, Utah 84070
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-2 Email arronesg((aol.com
£i1tt~lÄ
Donovan E. Waïr
IDAHO POWER COMPANY'S RESPONSE TO THE SIXTH PRODUCTION REQUEST OF THE
NORTHWEST AND INTERMOUNTAIN POWER PRODUCERS COALITION TO THE JOINT UTILITIES - 13