20110119Reply Comments.pdf

KRSTINE A. SASSER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BARNO. 6618
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t 9 Pf1 12: 25iOU J~Ji .
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE JOINT PETITION )
OF IDAHO POWER COMPANY, A VISTA )
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-IO-4
REPLY COMMENTS OF
THE COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilties Commission, by and through its
Attorney of record, Kristine A. Sasser, Deputy Attorney General, and in response to the Notice
of Joint Petition, Notice of Modified Procedure, Notice of Intervention Deadline and Notice of
Oral Argument issued in Order No. 3213 1 on December 3, 2010, in Case No. GNR-E-1O-4,
submits the following reply comments.
BACKGROUND
On November 5, 2010, Idaho Power Company, Avista Corporation, and Rocky Mountain
Power (Utilties) fied a Joint Petition to Address Issues and to Adjust the Published Avoided
Cost Rate Eligibilty Cap. On December 22,2010, Comments were fied in response to the
Utilties Petition by Commission Staff, Interveners and other interested paries. Staff wishes to
submit Reply Comments in response to the comments filed by the Northwest and Intermountain
REPL Y COMMENTS OF
THE COMMISSION STAFF 1 JANUARY 19,2011
Power Producers Coalition (NIPPC), and to provide additional clarification to some of the
comments submitted by Staff on December 22, 2010.
STAFF REPLY
Reducing the Eligibilty Cap Would neither Frustrate the Intent ofPURPA nor Violate It
In its December 22, 2010 comments, NIPPC argues that reducing the eligibilty cap
would frstrate the fudamental purpose ofPURPA, in violation of that federal law. Reference
Comments in Opposition by the Northwest and Intermountain Power Producers Coalition and
Alternative Requestfor an Evidentiary Hearing, p. 6-8. Staff respectfully disagrees with NIPPC.
The fundamental purpose of PURP A was to create an incentive for development of small
renewable resource projects by leveling the playing field such that a utility and its customers are
indifferent as to whether the utilty generates the power itself or acquires it from another source.
FERC's rules implementing PURP A require that utilities offer to purchase energy and capacity
from Qualifying Facilties (QFs) at the utilties' avoided cost. Utilties' avoided costs are to be
determined by each state utilty commission. FERC has allowed states a wide degree of latitude
in establishing an implementation plan for PURP A, as long as such plans are consistent with
FERC regulations. 133 FERC ~ 61,059 at 11. "Such latitude is necessary in order for
implementation to accommodate local conditions and concerns, so long as the final plan is
consistent with statutory requirements." Reference Policy Statement Regarding the
Commission's Enforcement Role under Section 210 of the Public Utilty Regulatory Policies Act
of 1978, Docket No. PL83-4-000, 23 FERC ~ 61,304, at p. 61,646 (1983). With regard to review
and enforcement of avoided cost determinations, the Commission's role is generally limited to
ensuring that the state regulatory authority's implementation plan is consistent with section 210
ofPURPA and with FERC's regulations.)
FERC's implementing regulations require that "standard" rates shall be put into effect for
purchases from QFs with a design capacity of 100 kW or less. FERC's rules allow "standard"
rates to be put into effect for purchases from QFs with a design capacity of more than 100 kW.
) California Public Utilties Commission, 133 FERC ~ 61,059 at ~ 24 (2010) (October 21,2010
Order) citing American REF-FUEL Company of Hempstead, 47 FERC ~ 61,161, at 61,533
(1989); Signal Shasta, 41 FERC ~ 61,120 at 61,295; see also LG&E Westmoreland Hopewell, 62
FERC ~ 61,098, at 61,712 (1993).
REPL Y COMMENTS OF
THE COMMISSION STAFF 2 JANUARY 19,2011
Reference 18 CFR 292.304( c)( 1 and 2). The 10aMW eligibility cap for published rates is solely
a creation of the Idaho Commission, not of the FERC. Nonetheless, the 10 aMW eligibilty cap
is entirely consistent with PURP A and the implementing rules of FERC. In prior proceedings,
the Commission has determined that an SAR methodology shall be used to compute such
"standard" rates, i.e., "published rates" for QFs smaller than 10 aMW, and that an IRP-based
methodology shall be used to establish rates for QFs 10 aMW and larger. For most of the history
of PURP A implementation in Idaho, the Commission has found it appropriate to utilze a 10
aMW eligibility cap for published rates; however, the Commission has lowered the cap on at
least two occasions. See IPC-E-05-22, Order No. 29839; IPC-E-93-28, Order No. 25884.
In large par, the rationale behind Idaho's establishment of the 10 aMW eligibilty cap has
been that by making published rates available to small QFs, the developers of those QFs could
avoid diffcult and costly contract negotiations with the utility. The Commission determined that
10 aMW was a reasonable size threshold to differentiate between large QFs capable of rate
negotiations and small QFs who should be entitled to published rates. Projects 10 aMW and
larger are required to have their rates computed using an IRP-based methodology. The IRP-
based methodology, because it requires modeling of the proposed QF along with the utilty's
existing resources and the resources in its IRP portfolio, recognizes the individual generation
characteristics of the QF and, in theory, results in a unique set of avoided cost rates for each QF
modeled. Because of its abilty to recognize and account for individual QF project
characteristics, it could be argued that the IRP methodology is much better suited for computing
avoided cost rates for large, aggregated wind facilties because of their significant differences
from other types of QF resources and because of the total amount of energy that they actually
produce.
In any case, whichever method the Commission uses to compute avoided cost rates is
entirely within the Commission's discretion as long as rates are (1) just and reasonable to electric
customers and in the public interest, (2) not discriminatory against QFs, and (3) not in excess of
the incremental cost to the electric utilty of alternative electric energy. 18 CFR 292.304(a); 133
FERC ~ 61,059. FERC rules do not specify which method is to be used, nor do FERC rules
prohibit use of multiple methods and development of criteria for determining which method to
use. FERC rules state that standard rates for purchases may differentiate among qualifying
facilties using various technologies on the basis of the supply characteristics of the different
REPL Y COMMENTS OF
THE COMMISSION STAFF 3 JANUARY 19,2011
technologies. 18 CFR 292.304(C)(3)(ii). Moreover, FERC has ruled that a multi-tiered avoided
cost rate structure2 can be consistent with the avoided cost rate requirements set forth in PURP A
and FERC's implementing regulations. See California Public Utilities Commission, 133 FERC~
61,059 at ~ 26 (2010) (October 21, 2010 Order). If different methods are required in order to
fairly and accurately differentiate among QFs, then it seems reasonable to assume that different
methodologies are acceptable for computing avoided cost rates. Furhermore, the criteria for
determining the circumstances under which each method shall be used is also entirely within the
Commission's discretion. As long as the Commission develops "standad" rates for projects with
a design capacity of 100 kW or less, it has met FERC's requirements. Therefore, lowering the
eligibilty cap for published rates would in no way be a violation of PURP A or FERC's
implementing rules. Contrary to the assertions of NIP PC, Staff argues that not reducing the
eligibilty cap would be a violation of PURP A if it allows QFs to be compensated at levels in
excess of the utilties' true avoided costs.
Wind Integration is Not the Only Issue in this Case
NIPPC's characterization of the issues in this case as being solely related to wind
integration fails to recognize all of the other identified issues. NIPPC asserts that a drop in the
eligibilty cap is not warranted because the record does not demonstrate that Idaho Power will be
unable to integrate the amount of wind proposed, or that the curent wind integration charge is an
inaccurate reflection of the integration costs. Contrary to NIPPC's assertions, the Joint Petition
does not cite inaccurate wind integration charges as a reason for lowering the eligibilty cap, and
only tangentially cites the inability to integrate increasing amounts of wind generation. The
reasons cited by the Utilities in support of their Joint Petition were namely
a) the SAR methodology for computing avoided cost rates is inadequate for large projects
because it does not represent the actual costs avoided by a utilty,
b) the SAR methodology fails to account for the different characteristics of various types of
generation resources,
2 In the context of the cited case, a "multi-tiered" avoided cost rate strcture referred to offering a certain rate to
combined heat and power generation technology while offering a different avoided cost rate to other generation
technologies.
REPL Y COMMENTS OF
THE COMMISSION STAFF 4 JANUARY 19,2011
c) the current requirements for PURP A development in Idaho have created a situation in
which the utilties' IRP processes are being circumvented,
d) the curent rules provide incentives to develop PURP A facilities that provide generation
when it is not needed,
e) surplus PURP A generation causes significant operational and reliabilty issues, and
f) the continued addition of QF generation at published avoided cost rates is very costly to
customers.
Clearly, Staff believes, the issues in this case go far beyond just the integration costs and
abilities of the Utilities to integrate increasing amounts of new wind generation.
NIPPC's Comments on Disaggregation are Misleading
In its comments, NIPPC also cites a recent FERC decision3 as purported evidence of
FERC endorsement of disaggregation of large wind projects into multiple smaller projects. In
that case, six separate QFs developed by John Deere Renewables petitioned FERC to overtur a
Texas PUC decision to deny the projects long-term contracts at avoided cost rates calculated at
the beginning of the contract, rather than rates calculated throughout the course of the contract
term at the time of actual energy deliveries. NIPPC reasons that because FERC knew these wind
projects were developed by one large, sophisticated developer utilzing the one-mile-rule to
break up a 129.4 MW project into smaller projects to qualify below the 80 MW limit, yet
nevertheless ordered that the QFs were entitled to PURP A contracts, that somehow FERC is
making a judgment on disaggregated wind projects.
The exclusive focus of this case was on whether the Texas PUC decision to deny
contracts containing fixed long-term rates was inconsistent with PURP A and FERC's
implementing regulations. The QF status of the projects as a consequence of their disaggregated
configuration was never in dispute by any pary, nor did FERC ever make any judgment related
to this fact. For NIPPC to cite this case as an affrmation by FERC that disaggregation of large
wind projects is acceptable, paricularly since it bears no relationship to disaggregation of large
projects in order to meet Idaho's 10 aMW eligibility cap, is misleading and inappropriate.
3 See JD Wind I, LLC, JD Wind 2, LLC, JD Wind 3, LLC, JD Wind 4, LLC. JD Wind 5. LLC, JD Wind 6, LLC,
"Notice ofIntent Not to Act and Declaratory Order," 129 FERC ~ 61,148, at ~~ 24-29 (November 19,2009).
REPL Y COMMENTS OF
THE COMMISSION STAFF 5 JANUARY 19,2011
Clarification of Staff Comments on a Five-Mile Separation Rule
In its comments, Staff discussed a five mile separation rule as one possible long-term
solution to address disaggregation of large projects into smaller 10 aMW projects in order to
qualify for published rates. Staff discussed a fiing made by Idaho Power in 2007 seeking to
implement a five-mile separation rule, and related that the Commission had denied Idaho
Power's request. Staff also pointed out that a similar rule had been adopted in Oregon,
seemingly successfully. Staff expressed concerns about whether such a rule would be legal
under FERC guidelines, yet expressed a wilingness to explore similar options if one can be
proposed that passes legal scrutiny and offers an effective means of addressing the
disaggregation issues.
Since filing its initial comments, Staff has conducted additional research. Staff is
confident that a five-mile separation rule could be implemented without violating either PURP A
or FERC's implementing rules as long as the "floor" established by FERC is met.4 As long as the
Commission offers a published rate for QFs producing 100 kW or less, Staff believes, in its
discretion, the Commission can also create a published rate for QFs with paricular
characteristics, located five miles or more apar and producing between 100 kW and 10 aMW, to
be compensated at an alternative published rate. Such a rule could be implemented either alone
or in combination with a reduction in the eligibilty cap for published rates so that projects with
unique characteristics could be analyzed more accurately for purposes of computing avoided cost
rates.
NIPPC cites a recent FERC rule-making in which the Edison Electric Institute (EEl)
requested that FERC "revisit the 'one-mile-rule' used to determine whether two facilities are par
of the same QF for purposes of § 292.204(a)." Revision to Form, Procedures, and Criteria for
Certifcation of Qualifing Facilty Status for a Small Power Production Facilty, 75 Fed. Reg.
15950, 15955 (March 30, 2010). EEl asked "that the Commission (FERC) adopt a rebuttble
presumption that facilties on sites located more than one mile apart are independent for purposes
of QF certification, but that utilties would be allowed to rebut this presumption upon a showing
that the facilities, although located more than one mile apar, are 'part of a common enterprise'
4 The "floor" established by FERC requires that stadard/published rates be made available for each QF producing
100 kW or less. 18 CFR 292.304(c).
REPL Y COMMENTS OF
THE COMMISSION STAFF 6 JANUARY 19,2011
and should thus be considered as a single entity, not entitled to more separate certifications of QF
status." Id.
NIPPC contends that FERC rejected the utilty proposal to reinterpret its one-mile-rule,
observing that the one-mile-rule has been part of its regulations since the inception of PURP A.
Id. Staff maintains that NIPPC's contention is grossly misleading. First, the entire focus of the
case cited by NIPPC was on the content and structure of the form (Form 556) required to be
submitted to FERC for facilities to be self-certified as Qualifying Facilities. The proceeding had
virtually nothing to do with changes to the actual criteria for obtaining QF status or with the
definition of a qualifying facility. What FERC actually said in its Order was "The Commission
declines, as beyond the scope of this proceeding, the request by EEl to adopt a presumption
that facilties on sites located more than one mile apar are independent for puroses of QF
certification, and that such presumption is rebuttble based on considerations EEl enumerates."
Id. (emphasis added). NIPPC's implication that FERC's ruling in the case represented offensive
resistance to changes or alternatively, affrmation of current interpretation of the rules, is highly
presumptuous at best.
Procedural Matters
NIPPC's comments recommend that the Commission deny the request to reduce the
published avoided cost rate eligibility cap, and alternatively requests that the Commission hold
an evidentiary hearing prior to issuing any order in reducing the cap. Staff notes that interveners
in this case have been provided opportunities to submit both direct and reply comments, in
addition to having the opportunity to make oral arguments, now scheduled for January 27, 2011.
Staff believes that this has afforded all paries ample opportunity to introduce evidence and offer
legal arguments necessary to establish a record upon which the Commission can base its
decisions. While this case involves a blend of factual and legal issues, the Commission's
decisions, in Staffs opinion, are mostly a matter of policy. Therefore, Staff does not believe an
evidentiar hearing is necessary or that it would serve any useful purose.
REPL Y COMMENTS OF
THE COMMISSION STAFF 7 JANUARY 19,2011
Respectfully submitted this J 9 I. day of Januar 2011.
~te:Ce. a. ~4A'A_
KristIne A. Sasser
Deputy Attorney General
Technical Staff: Rick Sterling
i:umisc:comments/gnrel O.4ks_dh reply comments. doc
REPL Y COMMENTS OF
THE COMMISSION STAFF 8 JANUARY 19,2011
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THT I HAVE THIS 19TH DAY OF JANARY2011,
SERVED THE FOREGOING REPLY COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. GNR-E-I0-04, BY MAING A COPY THEREOF, POSTAGE PREPAID, TO
THE FOLLOWIG:
DONOVAN E WALR
LISA D NORDSTROM
IDAHO POWER COMPAN
PO BOX 70
BOISE ID 83707-0070
E-MA: dwalkeraYidahopower.com
InordstromaYidahopower .com
MICHAL G ANDRE
AVISTA CORPORATION
1411 E MISSION AVE
SPOKA WA 99202
E-MA: michael.andreaaYavistacorp.com
ROBERT D KA
NW & INERMOUNAI POWER
PRODUCERS COALmON
1117 MINOR AVE STE 300
SEATTE WA 98101
E-MA: rkahnaYnippc.org
ROBERT A PAUL
GRA VIEW SOLA II
15690 VISTA CIRCLE
DESERT HOT SPRIGS CA 92241
E-MA: robertapau108cmgrail.com
RONALD L WILIAS
WILIAS BRABURY PC
1015 WHAYSST
BOISE ID 83702
E-MA: ronaYwiliamsbradbury.com
DANEL E SOLAER
ROCKY MOUNAI POWER
201 S MA ST STE 2300
SALT IA ClIY UT 84111
E-MA: daniel.solanderaYpacificorp.com
PETER J RICHASON
GREGORY MADAMS
RICHASON & O'LEARY
515 N 27TH STRET
BOISE ID 83702
E-MA: peteraYrichardsonandoleary.com
gregaYrichardsonandoleary.com
DON STUTEAN
ENERGY DIRCTOR
J R SIMPLOT COMPAN
PO BOX 27
BOISE ID 83707-0027
E-MA: don.sturtevantaYsimplot.com
JAMS CARULIS
ENXGY DEVELOPMENT GROUP OF
IDAHOLLC
802 W BANOCK ST STE 1200
BOISE ID 83702
E-MA: jcarkulisaYexergydevelopment.com
SCOTT MONTGOMERY
PRESIDEN
CEDAR CREEK WID LLC
668 ROCKWOOD DR
N SALT IA UT 84054
E-MA: scottaYwesternenergy.us
CERTIFICATE OF SERVICE
DANA ZENZ
VICE PRESIDEN
SUMIT POWER GROUP INC
2006 E WESTMINSTER
SPOKA WA 99223
E-MA: dzentzaYsumitpower.com
JOHNRLOWE
REEWABLE ENERGY COALTIION
12050 SW TRMONT ST
PORTL OR 97225
E-MA: jravensanmarcosCfahoo.com
BILL PISKE MGR
INTERCONNCT SOIA
DEVELOPMEN LLC
1303 E CARTER
BOISE ID 83706
E-MA: bilpiskeaYcableone.net
PAUL MATIN
INTERMOUNAI WI LLC
PO BOX 353
BOULDER CO 80306
E-MA:
paulmartinaYintermountainwind.com
SHELLEY M DAVIS
BARR ROSHOLT ET AL
STE 102
1010 W JEFFERSON ST
BOISE ID 83701
E-MA: smdaYidahowaters.com
TED DIEHL
GENERA MAGER
NORTH SIDE CANAL CO
921 N LINCOLN ST
JEROME ID 83338
E-MA: nscanalaYcableone.net
THOMA H NELSON
REEWABLE ENERGY COALITION
PO BOX 1211
WELCHES OR 97067
E-MA: nelsonaYthnelson.com
R GREG FERN
MIM LAW OFFICES PLLC
2176 E FRAIN RD
STE 120
MERIDIA ID 83642
E-MA: gregaYmimuralaw.com
DEAN J MILLER
McDEVITI & MILLER LLP
PO BOX 2564
BOISE ID 83701
E-MA: joeaYmcdevitt-miller.com
WADE THOMA
DYNS ENRGY LLC
776 E RIRSIDE DR
STE 15
EAGLE ID 83616
E-MA: wthomasaYdynamisenerg.com
BRI OLMSTE
GENERA MAAGER
TW FALLS CANAL CO
PO BOX 326
TW FALLS ID 83303
E-MA: olmsteadaYtfcanal.com
BILL BROWN CHA
BOAR OF COMMISSIONERS
OF ADAMSCOUNID
PO BOX 48
COUNCIL ID 83612
E-MA: dbbrownaYfrontiernet.net
CERTIFICATE OF SERVICE
TED S SORESON PE
BIRCH POWER COMPAN
5203 SOUTH 11 TH EAT
IDAHO FALLS ID 83404
E-MA: tedaYtsorenson.net
GLEN IKMOTO
MAGART RUEGER
IDAHO WIDF ARS LLC
672 BLA AVEE
PIEDMONT CA 94611
E-MA: gleniaYenvisionwind.com
margaretaYenvisionwind.com
~'J .l,t9
C ARY
CERTIFICATE OF SERVICE