20130205reconsideration_order_no_32737.pdf

Office of the Secretary
Service Date
February 5,2013
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMMISSION’S )
REVIEW OF PURPA QF CONTRACT )CASE NO.GNR-E-11-03
PROVISIONS INCLUDING THE )
SURROGATE AVOIDED RESOURCE (SAR))
AND INTEGRATED RESOURCE PLANNING )
(IRP)METHODOLOGIES FOR )ORDER NO.32737
CALCULATING AVOIDED COST RATES.)
_________________________________________________________________________________________
)
On December 18,2012,the Commission issued final Order No.32697 deciding
various issues related to avoided cost rate methodologies and other issues regarding Public
Utility Regulatory Policies Act (PURPA)contracts.On January 8,2013,Idaho Power Company,
Renewable Northwest Project,Renewable Energy Coalition,Idaho Conservation League and
J .R.Simplot/Clearwater Paper filed timely requests for reconsideration/clarification.
Commission Staff and Idaho Wind Partners filed timely answers to the petitions.
Idaho Power filed what it captioned as a “Response and Cross-Petition”within the time allowed
for answers.On January 22,2013,Mountain Air Projects filed an untimely answer to the
petitions.On January 23,2013,the Canal Companies filed what was captioned as a “Reply”to
Idaho Power’s Response and Cross-Petition.Based upon our review of the Petitions for
Reconsideration/Clarification,the answers and the underlying record in this case,we partially
grant reconsideration/clarification and partially deny reconsiderationlclarification as set out in
greater detail below.
ISSUES ON RECONSIDERATION
A.Legal Standards
Reconsideration provides an opportunity for a party to bring to the Commission’s
attention any question previously determined and thereby affords the Commission with an
opportunity to rectify any mistake or omission.Washington Water Power Co.v.Kootenai
Environmental Alliance,99 Idaho 875,879,591 P.2d 122,126 (1979).The Commission may
grant reconsideration by reviewing the existing record,by written briefs,or by evidentiary
hearing.IDAPA 3 1.01.01.332.If reconsideration is granted,the record must be finally
submitted within 13 weeks after the deadline for filing petitions for reconsideration.Idaho Code
ORDER NO.32737 1
§61-626(2).The Commission must issue its Order upon reconsideration within 28 days after the
matter is finally submitted for reconsideration.Id.
Consistent with the purpose of reconsideration,the Commission’s procedural rules
require that petitions for reconsideration “set forth specifically the ground or grounds why the
petitioner contends that the order or any issue decided in the order is unreasonable,unlawful,
erroneous or not in conformity with the law.”Rule 331.01,IDAPA 31.01.01.331.01.Rule 331
further requires that the petitioner provide a “statement of the nature and quantity of evidence or
argument the petitioner will offer if reconsideration is granted.”Id.
B.Renewable Energy Credits
Three parties petitioned the Commission to reconsider its decision regarding the
ownership and allocation of renewable energy credits (RECs).Renewable Northwest Project
(RNP),Idaho Conservation League (ICL),and Simplot/Clearwater all objected to the
Commission’s decision that ownership of RECs be equally apportioned between the utility and
the QF for projects that are priced under the IRP avoided cost pricing methodology.Order No.
32697 at 46.The three petitioners argued that the Commission’s REC decision “lacks an
adequate legal foundation”(RNP at 1);is unreasonable,unlawful and erroneous
(Simplot/Clearwater at 11);and is an abuse of discretion (ICL at 1).In addition,ICL asserted in
its Petition that the Commission does not have subject matter jurisdiction to determine the
ownership and allocation of RECs.ICL and RNP requested that the Commission schedule
additional legal briefing if reconsideration was granted on this issue.
Idaho Power filed a Response and Cross-Petition for Reconsideration addressing the
REC issue raised by the three petitioners.See Rule 331.02.Idaho Power argued that the
Commission “clearly has subject matter jurisdiction”to determine the REC issue.
Response/Cross-Petition at 17.In addition,Idaho Power argued that the Commission should
deny reconsideration of the REC issue on the merits.Id.at 19.If the Commission grants
reconsideration Idaho Power stands ready to present further evidence and legal argument to
support its Cross-Petition that “the utility be determined the owner of RECs.”Id.
Commission Findings:The Commission grants reconsideration on the issue of
RECs.We find that the petitioners primarily raise issues of law so further evidence is not
necessary.See Rule 332.Although the Commission has decided to reconsider its REC decision,
we do not seek further legal briefing on this issue.The REC issue has already been the subject
ORDER NO.32737
of extensive legal briefing by the parties in this case.In particular,the three petitioners and the
cross-petitioner have previously submitted extensive legal briefs addressing REC ownership.In
addition,the three parties seeking reconsideration do not raise new legal issues for us to
consider.Consequently,we will reconsider the REC issue and review Order No.32697 based on
the existing record and previously filed legal arguments.See Rule 284.01.
C.Canal Drop Hydro/Resource-Specfic Capacity Factors
Renewable Energy Coalition filed a Petition for Clarification regarding the
Commission’s definition of what qualifies as a “canal drop hydro”project.Order No.32697,
Attachment A defines “canal drop hydro”as “a generation facility which produces a majority of
its generation during the irrigation season and is located on a man-made waterway that conveys
water primarily intended for irrigation or that primarily conveys irrigation return flows.”The
Coalition,in asking for clarification,proposed an alternative definition of canal drop hydro.
Specifically,the Coalition maintains that a requirement that water be conveyed through or over a
“man-made waterway”does not have any meaningful correlation to the timing of when the
power is produced,or the value of the power.Petition at 3.
Commission Staff argued in its answer that the capacity factor assumptions for canal
drop hydro are reasonable and went unchallenged during the course of this case.Staff opposed
the definitional changes recommended by the Coalition.However,Staff proposed that the
Commission allow the parties to explore the issue more fully on reconsideration.
Idaho Power also opposed the Coalition’s proposed changes.Idaho Power explained
that the source of the water is less important than when it generates and delivers energy to the
utility.Idaho Power proposed that “only those canal drop hydro projects whose off-season,off-
peak generation is de minimis when compared to their in-season,on-peak generation be qualified
to receive the higher capacity factor....“Response at 8.Idaho Power suggested that the
definition could be left undisturbed and projects seeking canal drop hydro rates be considered on
a case-by-case basis.Id.Idaho Power’s initial Petition for Reconsideration addressed the issue
of resource-specific capacity factors.In its Response,Idaho Power requested clarification
regarding the capacity factors utilized in the SAR model for only the “canal drop hydro”and
“other”project categories.
Commission Findings:After reviewing the arguments presented by the parties,we
grant reconsideration of the canal drop hydro issues raised.We also grant reconsideration!
ORDER NO.32737 3
clarification regarding the capacity factor utilized in the SAR model for “other”projects.Canal
drop hydro has a separate,higher,set of rates because irrigation-related projects provide capacity
when the utility most needs it —during the peak hours of the peak days of the year (i.e.,during
the summer season).The issues surrounding the definition of canal drop hydro and resource-
specific capacity factors were not explored at hearing.The parties focused on other issues.
Therefore,we find it appropriate to grant reconsideration to allow for discovery and comments
on the narrow issues of:(1)definition of canal drop hydro,and (2)capacity factors as they relate
to “canal drop hydro”projects and “other”projects under the SAR methodology.
In order to accommodate the compressed timeframe of review on reconsideration,we
direct the parties to provide answers to production requests within 14 days.Initial comments
must be filed no later than March 25,2013,with reply comments due no later than April 8,2013.
D.Contract Extension/Renewal Language
Both Idaho Power and Renewable Energy Coalition sought clarification of the
Commission’s findings regarding contract extensions and renewals.Idaho Power requested that
the Commission clarify that it “did not intend to authorize any contract extensions or renewals,
where those contracts do not provide for any renewal or extension of the term of the agreement.”
Petition at 6.The Coalition requested clarification “as to the published avoided cost rates for
QFs that have existing contracts that will be expiring....“Petition at 2,The Coalition
suggested that clarification could be accomplished by providing attachments showing published
rates for existing QFs seeking a contract renewal or extension —which would include capacity
payments in the initial years of capacity sufficiency.Id.
In answer to Idaho Power’s concern,Commission Staff recommended that the
Commission refer to expiring contracts for projects that will continue to generate and sell energy
as “replacement contracts”or “new contracts for existing projects.”In response to the
Coalition’s request,Staff proposed that it maintain the capability to compute rates for
replacement contracts upon request.Staff explained that the SAR model could be modified to
include the capability to compute published avoided cost rates to be included in contracts for
either new QFs or for existing QFs seeking to replace expiring contracts.Answer at 2.
However,a full set of rate tables would comprise of 30 pages.To avoid confusion,Staff
proposed that it be directed to provide such information to interested parties upon request.
ORDER NO.32737 4
Commission Findings:The Commission grants clarification of its “contract
renewal”and “extension”language.In Order No.32697,we did not implicitly or explicitly
authorize contract extensions or renewals for existing contracts that do not contain such
provisions.Unless the contract provides for renewal,it is axiomatic that a new contract must be
negotiated between the parties.However,when an existing QF under a current contract desires
to continue to sell energy to the same utility after expiration of the current contract,and the
parties enter into a new contract for the sale and purchase of energy,the QF is entitled to be paid
capacity for the full term of the new agreement.Order No.32697 at 21,22.
In order to address the Coalition’s concerns about access to published rate tables for
replacement contracts,the Commission grants clarification on this issue.We direct Staff to
modify the SAR model to include the capability to compute rates for existing QFs seeking to
replace expiring contracts.In order to avoid confusion that might result from 30 pages of
attachments,we direct Staff to provide rates for replacement contracts upon request by any
interested party.
E.Curtailment
Idaho Power requested clarification of the Commission’s findings regarding
curtailment pursuant to 18 C.F.R.§304(f).Specifically,“Idaho Power does not believe the
Commission intended to state that the parties did not contemplate compliance with the law —
with FERC rules and regulation [sic]—when entering into their respective power purchase
agreements under PURPA.”Petition at 5.
Idaho Wind Partners maintained in its answer that Idaho Power’s request was both
unnecessary and unsupported by the record.’Answer at 1.Consequently,Idaho Wind Partners
requested that the Commission deny Idaho Power’s request to clarify any language regarding 18
C.F.R.§304(f)and curtailment.
Commission Findings:The Commission denies Idaho Power’s request to clarify the
Commission’s findings regarding curtailment and the application of 18 C.F.R.§304(f).In Order
No.32697,the Commission made no findings regarding the parties’intent,or lack thereof,to
comply with federal law.On the contrary,the Commission observed that each power purchase
agreement contains a reference to the applicable federal rules and regulations.Order No.32697
On January 22,2013,Mountain Air Projects filed an answer to Idaho Power’s request to clarify the Commission’s
curtailment findings.Pursuant to Idaho Code §61-626(1),Mountain Air had until January 15,2013,to file its
answer.Because its answer was untimely,it will not be considered.
ORDER NO.32737 5
at 36.The Commission clearly stated that the need to curtail under the circumstances
contemplated by 18 C.F.R.§304(f)has only become an issue in Idaho over the last several
years.Id.Ultimately,Idaho Power’s proposed curtailment tariff was rejected by the
Commission because it was too vague and adoption of such a tariff was not adequately supported
by the evidence produced during the underlying proceedings.Id.
F.Updates to Gas and Load Forecasts
In our final Order we determined that the natural gas price forecast used in the SAR
model and the fuel and load forecasts used in the IRP Methodology should be updated every
June 1 utilizing data from the ETA’s Annual Energy Outlook,Order No.32697 at 52.Idaho
Power requested clarification of the Commission’s determination regarding fuel and load
forecast updates in two respects.First,Idaho Power proposed that the Commission consider
updating the SAR model “immediately upon release of the specifically designated EIA natural
gas price forecast”instead of waiting until June 1 in order to avoid “gamesmanship.”Petition at
8.Second,Idaho Power stated that the Company does not update its fuel and load forecasts
utilized in the IRP Methodology until October of each year.Consequently,Idaho Power
requested that annual updates to the fuel and load forecasts utilized in its IRP Methodology be
set for a different date.
Commission Staff recommended that the Commission maintain the June 1 date for
annual updates of the EIA gas forecast used in calculating the SAR rates,but add the qualifier
“or within 30 days of the final release of the EIA Annual Energy Outlook,whichever is later”to
accommodate for years when the release by ETA is too late to meet a June 1 update.Staff noted
that any timeline could still allow opportunities for gamesmanship.As to the timeline for
updating the gas and load forecasts used in the IRP models,Staff recommended that the three
utilities collaborate and propose a suitable and uniform date for the utilities to update the gas and
load forecasts used in their IRP methodologies.Answer at 6.
Commission Findings:The Commission grants clarification on the issue of annual
updates to the utilities’gas and load forecasts.The Commission finds that a single date for
annually updating both the SAR and IRP methodologies is not required.However,to avoid
confusion,ensure consistency,and alleviate gamesmanship,we find it necessary for all three
utilities to update their annual SAR gas forecast on the same date,and to also update their annual
IRP forecasts on a uniform date.We find that the final release of ETA’s Annual Energy Outlook
ORDER NO.32737 6
is the appropriate report to utilize for updates to the SAR Methodology’s gas forecast.Although
we anticipate that the final release of the ETA data will occur each year in time to meet a June 1
update to SAR-based avoided cost rates,we find it reasonable to further clarify that the annual
update of the EIA gas forecast should occur on June 1 or within 30 days of the final release of
the EIA Annual Energy Outlook,whichever is later.
Turning to the question of when to update the IRP methodologies,we direct the three
utilities to collaborate and propose,within 28 days from the service date of this Order,a suitable
date for all three utilities to update their gas and load forecasts used in their IRP methodologies.
If the utilities are unable to agree to a uniform date for updating their IRP gas and load forecasts,
they shall so advise the Commission and the Commission will subsequently decide.
G.Incremental Costs
Simplot/Clearwater requested reconsideration of Commission-ordered modifications
to how the IRP Methodology calculates avoided costs.Specifically,Simplot/Clearwater
maintained that the Commission’s final Order “approved sweeping changes in how avoided cost
rates are set using the IRP methodology.”Petition at 5.Simplot/Clearwater argued that the
Commission’s adoption of Idaho Power’s proposed “single-run”methodology deprives QFs of
compensation based on the utility’s full avoided cost.Id.at 10.
Commission Staff maintained that the Commission’s choice to move to an approach
that focuses on identifying the hourly incremental costs that would be avoided by the addition of
a QF to a utility’s system is not contrary to PURPA.Staff argued that Simplot/Clearwater failed
to demonstrate that the approach adopted by the Commission results in less than the utility’s full
avoided cost.Staff maintained that Simplot/Clearwater is simply dissatisfied with the
Commission’s finding.
Idaho Power maintained that Simplot/Clearwater’s argument regarding changes to
the IRP Methodology was flawed.Idaho Power explained that just because the Commission
found the previously approved IRP Methodology reasonable,it does not hold that a change to the
methodology is unreasonable.Response at 13.Idaho Power argued that basing the avoided cost
calculation on incremental cost “better aligned with FERC’s definition of avoided cost because it
focuses upon the incremental cost the utility would incur but for the purchase from the QF.”Id.
at 14.
ORDER NO.32737 7
Commission Findings:The Commission denies reconsideration of its findings
regarding use of incremental costs in determining avoided costs under the IRP Methodology.
The Commission provided a full and fair opportunity to address the issue.Simplot/Clearwater
fails to establish how an approach that focuses on identifying the hourly incremental costs that a
utility avoids by the addition of a QF to its system results in less than a full avoided cost as
required by PURPA and FERC regulations.Simplot/Clearwater may disagree with the
Commission’s decision to modify calculation of avoided costs under the IRP Methodology,but it
has not demonstrated that the Commission’s finding is unreasonable,erroneous,or contrary to
law.Moreover,the Commission’s decision is supported by substantial and competent evidence.
H.Determination of Capacity Deficiency
In its response,Idaho Power noted that,while the Company first shows a capacity
deficiency in July 2014,it is a deficiency of approximately one megawatt occurring for one hour.
According to Idaho Power’s 2011 IRP filing,the first resource addition is the Boardman to
Hemingway project in 2016.Response at 10.Idaho Power requested clarification as to why its
capacity payments in the published rate tables begin in 2014.Id.
Commission Findings:We grant Idaho Power’s request for clarification regarding
the Commission’s determination of capacity deficiency.The SAR model recognizes not only the
timing of when the first deficit occurs,but also the magnitude of the deficit.The SAR model
values capacity based only on the amount of capacity that is useful to the utility.In other words,
if only a portion of a QF’s capacity is needed in the initial years to fully satisfy the utility’s
deficit,then credit is only given for that portion.As the utility’s deficit grows,increasing
amounts of the QF’s capacity are given credit until the year when the utility’s deficit exceeds the
QF’s capacity,when full value for the QF’s capacity is given.
ORDER
IT IS HEREBY ORDERED that the Petitions for Reconsideration and/or
Clarification are granted in part and denied in part.The Commission grants reconsideration to
Renewable Northwest Project,ICL,and Simplot/Clearwater on the issue of REC ownership
without further submissions.The Commission will also consider Idaho Power’s Cross-Petition
on this issue.
IT IS FURTHER ORDERED that the Petitions for Clarification of Renewable Energy
Coalition and Idaho Power regarding the definition of canal drop hydro and the determination of
ORDER NO.32737 8
resource-specific capacity factors for “canal drop hydro”and “other”projects is granted.The
parties may engage in discovery and file initial and reply comments as more fully described in
the body of this Order.
IT IS FURTHER ORDERED that the Petitions for Clarification filed by Idaho Power
and Renewable Energy Coalition on the issues of contract renewal/extension and the published
rate tables associated with such replacement contracts are granted,as set out above.
IT IS FURTHER ORDERED that Idaho Power’s Petition for Clarification regarding
the date for updating the utilities’gas forecast in the SAR models and fuel and load forecasts in
the IRP methodologies is granted.The utilities shall comply with the Commission’s instructions
as more fully described in the body of this Order.
IT IS FURTHER ORDERED that Idaho Power’s Petition for Clarification and/or
Reconsideration regarding curtailment is denied.
IT IS FURTHER ORDERED that Simplot/Clearwater’s Petition for Reconsideration
on the issue of calculating incremental costs under the IRP Methodology is denied.
IT IS FURTHER ORDERED that Idaho Power’s Petition for Clarification regarding
the Commission’s determination of a utility’s capacity deficiency is granted,as set out above.
THIS IS A PARTIAL FINAL ORDER ON RECONSIDERATION.The issues of
contract renewal/extension,curtailment,incremental costs,and determination of capacity
deficiency have been finally decided in this Order and may be appealed to the Supreme Court of
Idaho pursuant to the Public Utilities Law and the Idaho Appellate Rules.See Idaho Code §61-
627.
ORDER NO.32737 9
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of February 2013.
ATTEST:
L4c
PAUL KJ AN fØ,PRESIDENT
MARSHA H.SMITH,COMMISSIONER
/1L
Jn D.Jewell J
CSmmission Secretary
ORDER NO.32737 10